Rategain Travel Technologies Ltd

NSE:RATEGAIN

Earnings Call Analysis

RateGain Announces Strong Q1 Earnings and Growth

RateGain Travel Technologies reports a robust start to FY 2024 with an 80% YoY increase in annual recurring revenue to INR 858 crores and similar growth in quarterly revenues. The company boasts a Q1 margin of 70.6% over last year's 10%, indicating efficient scaling and productivity with revenue per employee up by 53% YoY. Fuelled by high demand in the travel industry, their Adara business is on track for a $100 million run rate, while new contract wins surged to INR 59.3 crores from INR 18.9 crores. Data as a Service (DaaS) contributed to 32.9% of Q1 revenues, showing a strong growth trend. The Distribution segment accounted for 23.7%, with expected monetization of large projects to boost growth in latter quarters. Lastly, the Marketing Technology (Martech) business now includes Adara and contributed 43.4% of revenues, setting sights on expanding market share further.

RateGain's Strong Q1 Performance and Optimistic Outlook

RateGain Travel Technologies has kicked off fiscal year 2024 with robust first-quarter results, underscoring the positive momentum in the travel industry. CEO Bhanu Chopra highlighted how travel activity exceeds 2019 levels, and customers are increasing their spend on digitalization and technologies, benefiting RateGain. The company's annual recurring revenue soared by 80% to INR 858 crores, and quarterly revenue increased by nearly an identical margin to INR 214.5 crores. Noteworthy is the margin spike to 70.6% compared to the 10% of the previous year's equivalent quarter, underscoring sustainable growth and scalability of its SaaS model. Operating leverage has also led to better revenue per employee metrics, up by 53% year-over-year.

Solidifying Market Positions and Harnessing AI Capabilities

RateGain's Adara unit has shown promising advancements with an ambitious target of reaching a $100 million run rate, leveraging AI capabilities to enhance customer performance outcomes. The uptake of new contracts marked a massive increase to INR 59.3 crores from INR 18.9 crores last year. The company also generated a significant uptick in free cash flow, increasing to INR 15 crores from INR 4.8 crores year-on-year, indicative of improved profitability and strategic use of generative AI. They're positioning themselves as a potent force in digital marketing and competitive data sectors using AI-powered solutions.

Industry-Leading Performance and Expansion Plans

Internationally, travel demand remains vigorous, recovering fully in 17 out of 22 destinations over 2019 levels. The positive trends are fostering policy changes and new investments, providing RateGain with opportunities to solidify its market position via strategic R&D and acquisitions. Their data-as-a-service (DaaS) business now encompasses the Adara data operation, accounting for 32.9% of Q1's total revenue and is expected to power growth over the subsequent quarters. Meanwhile, the distribution segment represented 23.7% of revenues, and the marketing technology (Martech) business, inclusive of Adara, contributed 43.4% to the revenues. The focus remains on scaling the business, aiming to double revenues in the next three years. This strategic objective is supported by the recruitment of industry veterans, such as Peter Strebel as President for Americas, and the appointment of travel and hospitality expert David Peller as a Board Adviser.

Earnings Call Transcript 2024-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to RateGain Travel Technologies Limited Q1 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.

I would now like to hand the conference over to Mr. Bhanu Chopra. Thank you and over to you, sir.

[Bhanu Chopra, executive]

Thank you, ma'am, and a very good afternoon to everyone, and thank you very much for joining the earnings call for RateGain Travel Technologies Limited for the first quarter of this new fiscal year 2024. It's great to connect with all of you, and I'm excited to share some key updates from this first quarter.

Joining me on the call are Mr. Tanmaya Das, our CFO; and Mr. Divik Anand, our Head for Investor Relations.

We announced our first quarter results for the financial year 2024 earlier today, and I hope you've all had a chance to go through our financial results, press release and investor presentation that are available on the stock exchanges and are on our company website.

We continue to move from strength to strength and remain optimistic on the travel industry as activity in key markets remain above 2019 levels. The sustained growth of our customers' businesses is creating an opportunity for these businesses to focus on new digitization and technology initiatives, thus driving an increase in spending and therefore, building more momentum for RateGain. I'm happy to share some of that momentum already visible in our business as our operating metrics for Q1, which is traditionally a tough quarter for businesses, have improved significantly compared to last year.

Our annual recurring revenue touched a new high at INR 858 crores, growing at an impressive 80% year-on-year. Our quarterly revenues stood at INR 214.5 crores, growing at 79.8% year-on-year. We continue to champion sustainable growth by driving margin expansion each year-on-year with a Q1 margin of 70.6% compared to 10% in Q1 of last year on the back of operating leverage across our business, the inherent strength of our SaaS-based business model as we scale up.

In line with this, our revenue per employee has improved to INR 1.2 crores, improving 53% year-on-year. This is a metric we track that highlights productivity and potential to scale up the business without adding additional manpower.

We are witnessing strong growth in our Adara business on the strength of the platform and the ability to provide solutions that generate higher returns for our customers. We continue to focus on the low-hanging fruit of bringing it back to a $100 million run rate, and believe that we have the right team in place to make it happen as we continue to further invest in this business to drive growth.

Adara's brand recognition post acquisition has improved significantly where they are once again thought of as a top leader and premium partner for brands and PMOs.

Basically, our product -- basis our product proposition, our renewal conversations are turning into upgrades and more clients are choosing to activate performance marketing with us. This is our AI modeling capabilities leading to improved performance.

Our new contract wins grew multifold to INR 59.3 crores compared to INR 18.9 crores last year, highlighting the strength of our comprehensive digital marketing offering and the adoption of technology across clients to drive efficiencies and optimize their revenues. With a healthy conversion in Q1, our pipeline stands at INR 361 crores.

We generated a healthy free cash flow of INR 15 crores as opposed to INR 4.8 crores in the previous year, a significant improvement on the back of improving profitability. Generative AI and its adoption by companies continues to be at the forefront, and the investments related to developing the right solutions and access to the right data set to generate accurate and useful results continue to be constraining factors as mentioned by us earlier and reported also by some tech majors as it impacts start to show on the bottom line.

RateGain, with its own AI-powered data link and travel intent data is suitably positioned to solve for use cases across digital marketing and competitive data, helping companies control cost while improving outcomes. We continue to explore a terrible and scalable way to use generative AI and track use cases that have commercial viability in our industry.

Global Travel continues to remain strong at 17 out of 22 key global destinations having fully recovered over 2019. The Global Health Travel Index, which is an industry benchmark to measure growth stands at 104, showing steady month-on-month improvement.

The summer pulse report from Adara also highlights the sustained strong demand for both international and domestic travel in the Americas, reaffirming travel as a key sectoral team for the next few years. The momentum in the industry is driving policy change attracting new investments into the industry and unlocking new opportunities for players like RateGain to consolidate their position through strategic investments in R&D and acquisitions to have a larger share of a thriving market as the industry looks at adopting more technology to engage with travelers.

Let's now understand how these changes are impacting each of our business units. The DaaS business, which now includes the Adara data business contributed to 32.9% of the total revenue for Q1. This unit grew at a strong pace on the back of healthy traction across OTAs, airlines, hotels, car rentals and cruise lines. We continue to see incremental volume demand coming from our existing enterprise customers.

Given the importance of AI, most of our enterprises are deploying AI capabilities for their decision support systems, helping in revenue management and digital marketing. The main ingredient for training AI models is data. And thus, we are seeing exponential growth and data needs of our customers over the last couple of quarters. We expect to see this continued trend, which will continue to drive very strong growth for our DaaS unit over the next several quarters.

Distribution segment accounted for about 23.7% of our total revenue. Volumes growth helped steady in the past quarter, the continued demand across our International segment on both OTA and GDS channels. We continue to be the partner of choice for a large hotel chain as they undertake digital transformation products to modernize the distribution ecosystem and optimize their presence across channels.

Our order book will begin to monetize some very large products -- projects beginning of this quarter, and we will see full deployment play out in Q3 and Q4, which will poise this segment for good growth in upcoming quarters.

Booking.com recognize us as a premier connectivity partner for the sixth year in a row, which is a validation of the reliability of the connectivity platform we provide to our partner properties and to ensure a seamless experience for their guests.

Our Martech business, which now includes the Adara business contributed to 43.4% of our total revenues for Q1 on the back of leading hotel chains, airline and destination management organization trying to achieve higher returns from the marketing investments. We've solidified our positions with destination management organizations and continue to see good traction in the U.S. market with large enterprises, including hotel chain, select our paid digital media offering to drive higher ROI on their ad spend. We believe that the inherent strength of the Adara platform complements our digital marketing offerings to drive higher returns for our customers and fits in perfectly our vision of integrated tech stack geared towards helping our customers to acquire, engage and retain them and have a wallet share expansion with them.

Given the traction we see, we continue to invest in building our commercial teams and bringing back ex Adara folks to fuel the growth, and our quest to get back to glory days of Adara of $100 million run rate. I'm confident these additional investments in sales and marketing will continue to accelerate our growth of our Martech solution. Our focus is now to drive RateGain into a new goal of doubling our revenues in the next 3 years, and we've already started to lay the foundation for driving that growth by focusing on bringing in the best talent to scale RateGain.

At the beginning of fiscal year '21, we had restructured RateGain to drive more autonomy for each of these business units with the appointment of general managers, helping them drive healthy growth across each vertical, helping us cross a major milestone of $100 million ARR. Over the last few months, we've had leaders from marquee companies such as PCG, Netflix, and Deloitte join RateGain's leadership team to leverage their experience to build a world-class organization.

And as we look to further strengthen our leadership team, I'm delighted to announce the appointment of Peter Strebel, the current Chairman of Omni Hotels and ex-CEO of Wyndham Hotels, as our new President for Americas effective immediately. Peter is a 2-time CEO of Wyndham Hotels and Omni Hotels, and a hospitality industry veteran with a deep understanding of building and scaling commercial operations and marketing teams playing an instrumental role in creating and driving business development strategies to increase awareness and capture market share.

Along with Peter, I would also like to welcome another travel and hospitality veteran, David Peller as a Board Adviser. He will be instrumental in helping RateGain scale up its technology offering in line with the vision of creating an integrated tech stack rev match platform and establish strategic partnerships. Peter has vast experience having worked with Google, Booking.com, and having led the Amazon's division of Travel and Hospitality practice, which was a P&L of $2.7 billion.

As we welcome Peter and David, I also wanted to take a moment to thank Chinmai Sharma, our outgoing President Americas, for his immense contribution in guiding our business in Americas over the last 5 years and wish him the best of luck.

On the people front, we saw a healthy improvement in our attrition rate quarter-on-quarter. We now stand at 17.1%, and we continue to adopt best practices for an engaging and conducive work environment focused on employee welfare and growth. We've launched various initiatives in the past few quarters as we work towards making RateGain the employer of choice. In line with this, I'm proud to mention that RateGain was recently recognized by comparably as the best company for career growth and for diversity.

I'd like to now ask our CFO, Mr. Tanmaya Das to take you through the performance of Q1.

[Tanmaya Das, executive]

Thank you, Bhanu, and a very warm welcome to everyone on this call. I'm proud to report that the company has posted another strong set of results in the first quarter with continued improvement across all key operating metrics, contributing to robust revenue growth and margin expansion year-over-year.

Credit performance on top line and bottom line in a seasonally soft quarter underlines the strength of the business model and the value we are delivering to our customers. Our new contract wins grew threefold as we continue to mine and build a strong pipeline. This is on the back of continued traction with existing clients and new clients that we will be monetizing in the coming quarters. With operating leverage playing out, we witnessed significant margin expansion and continued on the path of sustainable growth, unlocking value for our stakeholders.

Adara continues to build on its momentum and deliver a strong quarter across growth and margins, underlining the strength of the platform. Our organic growth approach continues to be a key pillar of our growth strategy as we focus to build a comprehensive revenue maximizing solution to further deliver value to our customers or our goal of doubling revenue in the next 3 years.

For the quarter gone by, the company reported a revenue of INR 214.5 crores, with a year-over-year growth of 80%. We had well-rounded growth from all 3 verticals, with DaaS growing 139%, Distribution at 27% and Martech at 88% for the full year.

EBITDA grew by 217% to INR 37.8 crores for the year with the first quarter margin coming in at 17.6% as against last year, 10%, and holding the steady sequentially.

With wage hikes given in the first quarter, our operating costs grew by 65% year-over-year with revenue growth coming in at a faster click at 80% as operating leverage continually play out as we scale up.

The Q1 EBITDA is much higher than the guidance given in last quarter of 13% to 14%. Other high-margin businesses like DaaS saw a significant growth with increased demand of data volumes from our key customers, coupled with continued successful integration of Adara between revenue growth guidance.

Adara continues to outperform with strong revenue growth as it continues to see strong traction with new contract wins, and we have been able to reignite some of the lost relationships in the past few months. Adara, which was loss-making before the acquisition, registered 10.35% EBITDA in Q4 FY '23, and this quarter, the EBITDA margin has expanded to 15%. This business has very high operating leverage. With growth, we can expect the margins to further increase.

Our PAT grew 3x compared to last year, coming to INR 24.9 crores, up from INR 8.4 crores. Sequentially, the PAT was lower on account of onetime benefit of deferred tax asset benefit, which positively impacted the PAT last quarter. Without the onetime benefit, the PAT grew sequentially by 15%, up from INR 21.6 crores to INR 24.9 crores this quarter.

The company continues to have strong customer relationships that are helping in building scalable, predictable and sustainable revenue streams. With 115 customers added in this quarter, our customer count crossed 3,000 for the first time and now stands at 3,057.

Gross revenue retention and net revenue retention stood at 90% and 110%, respectively. One of the key metrics that we track is the revenue per employee. We saw a healthy increase of 53% over last year, and stands at INR 1.18 crore. We continue to make investments in expanding our sales and marketing efforts to propel future growth. And with that, our current pipeline stands at INR 361 crores.

We continue to have strong balance sheet where our net worth saw a 15% increase compared to last year and stood at INR 732.2 crores. Our cash and cash equivalent balance for the quarter stood at INR 344.1 crores.

In terms of guidance for FY '24 for the full year, we're confident of bidding the growth guidance given last time. And similarly, we would be looking to exceed the 17% margin guidance given for the full year.

With that, I would like to conclude my update, and we are happy to open the floor for questions. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Amit Kanodia from Smart Sync Services.

[Amit Kanodia, analyst]

Congratulations for a good set of numbers. So my first question is related to -- if I see your gross recurring revenue and net recurring revenue and comparing with what the numbers were exactly a year ago in Q1 FY '23, so the net recurring -- the gross recurring revenue at that time was 99% and today it is 90%. Whereas the net recurring revenue, today is 110%, which was about 105%. So if you can throw some more light as to what is going in these numbers, that would really help us a lot.

[Tanmaya Das, executive]

Look, 90% gross recurring revenue, gross retention -- gross revenue retention, which is called GRR, this is a SaaS benchmark and 90% is a good metric for SaaS companies. And we -- on NRR front, anything between 110% to 120% is a good benchmark for SaaS companies. And we track them pretty seriously. And this shows the mining of existing clients because our clear strategy is to land and expand. So majority of our growth, if you talk about, is coming from existing clients, and that's how the net retention rates -- we continue to strive to increase the net revenue retention.

[Amit Kanodia, analyst]

Sir, my question was basically why GRR is falling and NRR is increasing? What does that mean?

[Tanmaya Das, executive]

I mean, it's GRR -- look, the GRR was 90% -- between 90% to 95% historically. It has slightly decreased because our -- the brand engagement and brand monitoring business has sustained some voluntary churn because, we know, we let go some loss-making accounts. That's why there is the net retention ratio -- net revenue retention has decreased a little bit. But from other business parts of the existing business has been growing significantly, like some of the DaaS customers where the data volumes request that we are receiving is going through the group. So those relationships are expanding.

[Amit Kanodia, analyst]

Sure, sir. My second question is related to the margin. So if I understood correctly, I believe DaaS and Distribution are high-margin business, whereas Martech, the margin is a little lower. And when I see our growth in the last 1 year, the growth has been phenomenal in Martech. And what is yielding our EBITDA margin to grow in percentage terms? If we are getting more business through a relatively lower margin category, still our EBITDA margin as a percentage is increasing. So what has led to that increase? You can share it.

[Tanmaya Das, executive]

I mean, DaaS and Distribution have grown at a healthy pace. If you see the DaaS business over the last 3, 4 quarters, have gone to a significant growth path. And that has really helped improve the margin. Even Distribution last year, there was a 37% growth. And this year, we are registering a 27% growth. So those 2 segments have really -- growth in those 2 segments, which was much more than the guidance that we have given has really helped us to improve the margin.

[Operator]

The next question is from the line of Kaushik Jhawar from AK Investment.

[Kaushik Jhawar, analyst]

Firstly, congratulations for great set of numbers, team. So particularly, I have a question related to management. So I see that we are giving a lot of focus on the revenue, but I see the cash flows, right? When I see that, our amount is stuck significant in the receivables. That is I see, 30% of sales. And there is a contingent liability also we have. What is the update on this and on the receivable part? Can you give some clarity here?

[Tanmaya Das, executive]

Yes, receivables, the DSO is around -- currently around 75 to 80 days at this point of time. It continues to improve year-over-year. I think we are coming back from a -- obviously, COVID was 2 years back, but still, the after effects are there a little bit because some of the large customers who had given extended credit periods, and we were trying to cut them down. But it's still at 75 to 80 days. But the conversion is good. There is no significant bad debts happening or allowance for doubtful debt provision that we need to take.

The collections are happening, but it is more than what it should be. It should be either ideally around 60 days, which we are continuing our effort to do so at this point of time.

On the contingent liability, I think, both the cases, we're in a very strong position. There is no further updates. We have won those cases at appropriate levels and department, either it can -- may go for an appeal or not. But in both the cases, we are in a very strong footing.

[Kaushik Jhawar, analyst]

And can you give more color on the why in a SaaS-based business in this sector, when you're giving a value addition of -- to the customer, why receivables also we need 60 days? Can you explain further here?

[Tanmaya Das, executive]

Yes. But we are not -- we are SaaS-based, but we are an enterprise-focused company. So our customers are all big customers and the payment terms sometimes ranges from 30 days to 90 days. And in certain cases, as I told during COVID times, we are given extended credit period for these enterprise customers. So our ticket size is much higher than a normal SaaS companies where the ticket size is very low.

[Kaushik Jhawar, analyst]

So in a couple of years, then we'll go back to, again, 60 days. Is that assumption correct?

[Tanmaya Das, executive]

That's the effort. And it should -- you should see continuous improvement in that area.

[Kaushik Jhawar, analyst]

Okay. Okay. The next question I have is on the QIP. Because at the time of IPO also, we have raised some fresh issue. Now again, we are coming with the QIP of, I think, massive INR 600 crores. So I'm trying to understand this. We are -- we always look for acquisitions. And this time, are we going big on acquisition or rather than -- currently, we have acquired Adara. So we are in that ramp-up phase. So by when we are targeting this acquisition, it's in your plans, can you throw some light here?

[Bhanu Chopra, executive]

Yes. So we have a very, very active M&A program that we call programmatic M&A. There's a dedicated team to it. And we're seeing a very, very robust pipeline there. But as you guys already know, we are very fiscally disciplined on what we are willing to pay. And this proposal on QIP is really to create a war chest for M&A activity. So it's fully going to be focused on any big opportunity that might come along and creating a war chest along the same. So it's more of an enabling resolution.

We haven't yet determined at what time we will do. As we understand it, it's a window of a year. And at the right time, we want to act on it because as opportunities become available, the forecast of opportunities that we see right now, we do feel that we will be served better by having a war chest available. And we are also getting a lot of conviction and confidence in how, for instance, we've turned around Adara and other deals that we have done, that we have now the M&A playbook to consummate and drive these synergies. So there is confidence to do more and this just enables that.

[Kaushik Jhawar, analyst]

Okay. Like we have seen your execution in the past, so we truly believe that. But which area are you focusing here? Because there are DaaS, we have our own AI-related products, and in the Martech also, we have scaled that, and currently with Adara also, we are doing good. So which part you are seeing at where value addition can be more fruitful year? Because -- yes.

[Bhanu Chopra, executive]

Yes. Yes. So there are bunch of companies that are in adjacent spaces in Martech, in DaaS and Distribution, which helps us realize that vision of having one integrated tech stack. And our focus continues to be in key markets of Europe and U.S., which is where majority of our revenue comes from. So those are -- in terms of geography, those are the markets that we're looking at and capabilities are going to be -- continue to be the areas that we operate in. I -- as we've talked about our TAM being north of $8 billion, and they continue to be adjacent use cases in these -- each of these business units that we look to solve for. And not everything that we need to build, we can acquire as well. So whatever opportunities we are exploring, all perfectly in each of these markets.

[Kaushik Jhawar, analyst]

Okay. Okay. And lastly, I have a question on the -- since, for quite some time, we have been working on the products, right, with our R&D team, like [ away ] or multiple this one. So currently, we are ramping up our sales also. So where do you see that? Like, however the SaaS revenues grow like a hockey stick. So from which year we can expect that the green shoots happening? Currently, we are seeing that, but I'm asking which year really bullish, or you are saying that, okay, now the things can start firing, yes.

[Tanmaya Das, executive]

Yes. So the good news is that we've already planted the seeds 2, 3 years ago. So as you can see in the numbers that we are reporting and a lot of the adjacencies that we launch these products and we're seeing some very, very good traction. But I continue to feel that we haven't even scratched the surface. The foundational thing about RateGain is that each of the areas that we operate in is -- has such a massive opportunity that I do not believe we have reached the tipping point yet, where we can see exponential growth in each of these areas.

So when do I see that happen? I think it's happening, like I said, because when we came into the market, we were a INR 350 crores company just 1.5 years ago. And now approaching INR 1,000 crores. Yes, there is some revenue, which is inorganic, but we're seeing some very, very healthy organic growth even though the base has almost tripled. So I mean, I would say some of those hockey stick effects you're already seeing in our revenue. And like I said, the good news is there are so many seeds in planted that we will continue to see this trend over the next 2, 3 years. And thankfully, the -- there is tailwind in the industry also that will continue to benefit us.

[Operator]

[Operator Instructions] The next question is from the line of Karan Uppal from PhillipCapital.

[Karan Uppal, analyst]

A couple of questions from my side. Firstly, can you clarify what's the organic growth in this quarter?

[Tanmaya Das, executive]

So the organic growth is around 25%. That's the guidance we had given, that organic growth.

[Karan Uppal, analyst]

Growth in Y-o-Y, you're saying?

[Tanmaya Das, executive]

Yes. Y-o-Y. And yes.

[Karan Uppal, analyst]

Okay, okay. And in terms of Martech, so what led to such a strong growth? Is it due to Adara? Because there was some post churn, which was happening within the Martech, right? So yes, that's the question.

[Tanmaya Das, executive]

Yes. Within Martech, as you know, we have got 2 segments. One is the paid digital media and other is the brand monitoring and engagement. And brand engagement -- brand monitoring engagement where we are seeing the churn because we were letting go some of the loss making accounts. There, we don't have a growth, but the paid digital media organically has grown around 24%, 25%.

[Karan Uppal, analyst]

Okay. And rest, I believe, is due to Martech? Sorry, rest is due to Adara?

[Tanmaya Das, executive]

Yes, that's inorganic expansion here.

[Karan Uppal, analyst]

Okay. Okay. And last question from my side is in terms of the overall growth for this year, you had previously guided, individual segments like DaaS to be at 30%, Distribution 15%, Martech around 20%, but you have grown very -- at a very high rate in a weak quarter, so to speak. So what kind of a realistic growth we should expect in all 3 segments going ahead, as well as what kind of margins are you factoring in for the year?

[Tanmaya Das, executive]

Yes, we will be beating the guidance that we had given last year, but at what levels we will reach, I think it will take us another one more quarter to see how the H1 pans out. But yes, that's -- whatever guidance we have given last time, it seems we will be beating them. But I think more precise answer I'll be able to give in the next earnings call.

[Karan Uppal, analyst]

Okay. On the overall growth, can you give any range? Maybe 20% was the organic number which we had shared last time?

[Tanmaya Das, executive]

Yes, the last time, also from including organic and inorganic growth, we talked about a 55% growth, right? So that, I think, we will be beating that. But by how much and all, I think it will be better to give a better guidance after the H1 ends.

[Operator]

[Operator Instructions] The next question is from the line of Rohan Nagpal from Helios Capital.

[Rohan Nagpal, analyst]

I just had a couple of questions on the revenue distribution of the revenue mix. So if I look at the revenue by engagement, this aggregation that you've provided, there is about 37% of the revenue that is transaction-based. In prior quarters, the only transaction-based revenue you were generating were generated through Distribution. This time, the transaction-based revenue is far in excess of the revenue contribution of Distribution. So where exactly is that incremental transaction-based revenue coming from?

[Tanmaya Das, executive]

So yes, that's correct. So earlier, 25% was majorly contributed by Distribution segment. So now the Adara media segment is also a transaction-based model. When we charge to the customer, we charge and per impression basis. So that's why there is a shift in that number.

[Rohan Nagpal, analyst]

Got it. Okay. That's helpful. Sorry. And would it be possible to sort of spell out what the Adara media segment is exactly?

[Tanmaya Das, executive]

Yes. Adara has 2 revenue segment. One is the data segment where -- which is part of the DaaS, and the other is the media segment where -- which is part of our paid digital media segment. So we charge our customers based upon per impression basis, and that's how it is part of the transaction model.

[Rohan Nagpal, analyst]

All right. Okay. And then the other question I had, again on the revenue mix. So if the number that you cite as subscription revenue is 63.1%, but if I go back to the revenue by engagement this aggregation, subscription, what is explicitly subscription revenue is 25%. The only way to get to 63% is to add hybrid.

[Tanmaya Das, executive]

Hybrid.

[Rohan Nagpal, analyst]

So could you give us a sense of how much of that hybrid is a contractual revenue amount that you can expect to receive? And how much of that hybrid is contributed through a transaction or like usage-based -- I mean, usage-based billing?

[Tanmaya Das, executive]

See, all the hybrid revenue has a minimum subscription, right? And that's why we categorize it as a part of the subscription revenue. How much out of that will have minimum subscription and how much is exceeding, I don't have that data ready at this point of time. Maybe in a follow-up call, I can share more details on that.

[Rohan Nagpal, analyst]

Could you give a broad sort of brush of what that sort of...

[Tanmaya Das, executive]

No, that is -- we don't look at that way. So I won't have that data ready.

[Operator]

The next question is from the line of Shobhit Singhal from Anand Rathi.

[Shobit Singhal, analyst]

Congrats on a good set of numbers. So can you give us the breakup -- organic growth breakup between the DaaS and Martech segment?

[Tanmaya Das, executive]

So DaaS is 30%, organically grew in Q1, and that's what the guidance we have given. Distribution was like 27% and Martech as a combined is around 20%.

[Shobit Singhal, analyst]

Okay. And second question is, sir, so how is the progress on Revmax platform under Distribution segment? And what would be the timeline where it will start contributing meaningfully to revenue?

[Bhanu Chopra, executive]

Yes. So we've actually had [ beta ] released with a couple of clients, and we've also won a very large order with one European chain that we are looking to monetize by Q3. So as we sort of gain trust and confidence of the marketplace, we will look to accelerate our efforts. We've actually begun to hive off a sales team, a commercial team just to focus on taking this platform out as well. But in terms of meaningful contribution, I do believe that it's at least a year or 2 away. Now that we are approaching like INR 900,000 crores to get that kind of revenue impact, I think it's some distance away.

But I'm very bullish on the kind of traction that we are seeing. And these are very, very large deals. So we will see like a hockey stick type of impact on this whenever we see it in the years to come.

[Shobit Singhal, analyst]

Okay. And sir, have you given any guidance for Q2 FY '24?

[Bhanu Chopra, executive]

No. We are standing by, as Tanmaya mentioned, our guidance was 55% to 58% overall growth, and a 17% margin. But as you saw on our Q1 numbers, we've comfortably beaten those numbers, and we do believe that the guidance we gave, we will continue to exceed that, given the acceleration that we are seeing in pretty much all our business units with the order book that we have.

And I've talked about how we continue to recalibrate and invest in adding more salespeople incrementally. So for instance, we are seeing some -- like our growth on Martech, especially Adara has been really, really good. And as you might recall, the business was $100 million, came down to $25 million. So we are seeing very good growth there.

So what we're doing is, given they had let go of a lot of people during the time of COVID, we're bringing them back. As a matter of fact, just in the month of July, we added like 4 people back, who are ex Adara salespeople. So on the back of strong growth that we are seeing, and if you see our LTV to CAC numbers, they are also market-leading metrics. We get the confidence to continue to invest in our sales and marketing and our goal will be to beat the numbers that we've guided for this year, which we're very confident that we will. I think, to Tanmaya's point, we just don't know by how much is the delta going to be.

[Operator]

The next question is from the line of Kshitij Saraf from Tusk Investments.

[Kshitij Saraf, analyst]

Congratulations on the great results. I have a question, just beyond the numbers, we see NRR at 110%. So wanted to get a sense of what's really clicking? Is it the pricing change to everything, a more transaction or subscription based on the Martech side? Is it the hunting you've been doing and winning the large contracts? So how would we think of the growth which has come along?

[Tanmaya Das, executive]

So in terms of...

[Bhanu Chopra, executive]

Yes, go ahead, Tanmaya.

[Tanmaya Das, executive]

Yes. So NRR denotes the growth of our existing relationships, right? So as talked about like both in DaaS and Distribution have got very marquee customers, who are the big either the hotel chains or the big OTAs or car rental companies. So both in -- particularly in DaaS, the data requirement for these companies have increased significantly with the business growth they are experiencing. So that is number one, why the NRR has grown pretty healthy.

On the Distribution side also as the volume growth is also there because of -- everybody is operating at a higher level than the pre-COVID levels. So the volume growth in the existing clients are also there.

So these 2 reasons are why are the NRR has grown from 105% to 110%.

Bhanu, you want to add anything?

[Bhanu Chopra, executive]

That's good.

[Kshitij Saraf, analyst]

Okay. And secondly, when we look at a revenue growth guidance of, sort of doubling in the next 3 years. Are you thinking of any inorganic moves there? I'm just trying to think of, you have the RG Labs on one hand and then you have a very robust M&A pipeline on the other. So are you going to look to acquire for scale or product or skill set that you want to add? Any thoughts that would be really helpful.

[Bhanu Chopra, executive]

Yes. So it's going to be a combination of really 3 things, right? So like I said, within the existing product set as well, we are seeing quite an acceleration, and we are continuing to invest more in the sales and marketing there, we added more people in Latin America. We're bringing back ex Adara folks. We've really taken on digital marketing also in a big, big way and we're still -- a very, very good return on ad spend there. So we continue to invest in that area.

So from a -- continuing to -- if you look at the 4x4, 2x2 matrix of PCG, right? One is to continue to penetrate your existing products, and we are seeing some very good traction there. I would say, given the organic growth that we are seeing, we'll continue to see that growth basis that penetration strategy and making our products incrementally better. The revAI, [ UNO ], our integrated tech stack, the RG Labs initiatives are really new products to our existing customers in that PCG matrix, which will be the opportunity to add like an accelerator. And really, the third accelerator is really M&A.

But as we've demonstrated, if you look at our past record, we continue to acquire at least one company year since 2018, except for the COVID year. And even today, as we speak, we have a very robust M&A pipeline. So I'm very confident that given the pipeline that we have, we will continue to at least to do one deal a year. So with the combination of those 3 levers, it gives us the confidence that we can double our revenue.

[Operator]

The next question is from the line of [indiscernible], an Individual Investor.

[ Mitin ], your line is unmuted.

[Unknown Attendee]

[indiscernible]

[Operator]

As there's no response, we proceed to the next question from the line of Darshil Jhaveri from Crown Capital.

[Darshil Jhaveri, analyst]

Firstly, congratulations on a great set of results. Hello? Am I audible?

[Tanmaya Das, executive]

Yes.

[Darshil Jhaveri, analyst]

Yes. So sir, I wanted to ask about, our doubling of revenue in 3 years. So we are taking FY '24 as the base of [indiscernible] double in 3 years, right? Or is it FY '23? That's one clarification I wanted. And with the increase in the revenue and we seen our good operating leverage as we've always had. So what would be the ideal margin range that we could operate under?

[Bhanu Chopra, executive]

So yes, we are talking about FY '24 as the base. And let me also qualify the doubling of revenues as a aspirational goal. So I don't want you guys to come back and tell me, you committed to this. This is what we are aspiring to. And given, like I said, the product set that we have, and how -- what percentage of the market that we have, the opportunity that's ahead of us. In fact, also, the team that we are building, it's -- I can tell you, it's not a small thing. Nobody asked me the question on appointing Peter Strebel. This is a CEO of 2 very, very large hotel chains in the U.S. To be able to attract that kind of talent and how we are now in that position to upgrade talent to take the company to the next level, it gives me the confidence that it's a very, very doable objective that we set out.

On your question around margins, as I've stated previously as well, our mature products are actually north of 25%, 30% margin. And in a steady state, I do believe that we could near that number. It is the fact that the opportunity is so large ahead of us that we continue to invest in R&D and building up a commercial team. So whatever sales and marketing investments that we are doing today, there will be a lag of at least 2 to 3 quarters, and we continue to invest, sort of, in that fashion given the opportunity is so large. So that's why the margins are much lower because we're still a growth story. But in a steady state, I see me, at least, let's say, at a INR 2,000 crore number. I'm very, very comfortable to say we should be anywhere between 25% to 30% margin.

[Darshil Jhaveri, analyst]

That's very great to hear, sir. Sir, one more question regarding our inorganic strategy. So with the growth that we are seeing, maybe organic would count for maybe 20%, 25% of our growth, and a lot of our growth will come from our inorganic sector? Or how will it be?

[Bhanu Chopra, executive]

I think what you just stated is a fair way thinking. To think about it, if you do a 25% growth, you can actually double the company in 4 years. And I do believe very, very strongly that given the tailwinds that we have, the acceleration in our products and sales and marketing that we can achieve that 20%, 25% organic growth.

And then in addition to that, our inorganic play, which we've demonstrated, that we have a playbook that will add to the rest. So that gives us the confidence of aspiring to that goal of doubling revenues.

[Operator]

The next question is from the line of Prolin Nandu from Goldfish Capital.

[Prolin Nandu, analyst]

Bhanu, I hope I'm audible.

[Bhanu Chopra, executive]

Yes, yes.

[Prolin Nandu, analyst]

Yes, Bhanu. So yes, again, coming back to this aspiration of having 25% growth, right? Sorry, doubling your revenue in 3 years' time, on a base of FY '24. So I mean, that's a 25% kind of a CAGR for 3 years, right, in some sense? And that is something which we are already doing organically, right? So my question is that, is this not a very low bar to have, right? Given the sectoral tailwinds, given how small we are in the overall scheme of things, given the size of the opportunity and given some of the people then to whom we are recruiting and healthy profitability also. So I'm just trying to -- I mean, are you being overly conservative in giving this number? Because that's a 25% CAGR for 3 years. You mentioned that you will double your revenue in 4 years, but no, it's 3 years, right, in some sense. So and you are also mentioning that inorganic part, right, in some sense, for which you have INR 600 crores kind of enabling resolution. So I'm just trying to figure out what am I missing in terms of between the quality of growth comments and the quantum of growth aspirations that you have?

[Bhanu Chopra, executive]

These are very good points. I mean, look, from my perspective, we came into the market, we were at INR 350 crores. 1.5 years later, we are run rating close to INR 900,000 crores. And now I'm saying that we're going to double in 3 years. So from my perspective, in like 4.5 years, people who invested at INR 350 crores, now the company is growing like in a matter of 4.5 years about 6x. I don't think a lot of companies in the history of Indian stock exchange or stock market would have accomplished that. So I'm very, very comfortable taking on that target, and there's still a lot to do. So it's easy to put these numbers in an Excel spreadsheet, but -- and be very confident about it, but there is a fair degree of work to be done to execute on it.

And I -- my belief on setting goals and targets is that they should be a little stretched, but not as stretched that they're not achievable. So we -- and we want to continue to have this habit of saying things that we would deliver on, which I hope we have demonstrated that we have done.

So look, would it be more? Yes. But I do think that for me and for the team at RateGain, this is very much an achievable target, and that's how we want to pursue it.

[Prolin Nandu, analyst]

Sure, sure. No, because I mean, I was just trying to figure out whether are there any other -- I mean, any part of the business that you think are going to be a drag or going to grow at a lower pace going forward? That's what I wanted to double check with you, right? Or is it like [indiscernible].

[Bhanu Chopra, executive]

Yes. Look, I don't see any -- everything that we do, there is clear -- demonstrated the hack of it having a product market segment, meaning that the customers need the product. But as you scale, I think the eye needs to be on the execution. And I don't worry about the opportunity. I worry about execution. And I've been an operator for now 20 years, and I don't think that part of execution softly or easily. So I do feel like there is a tremendous amount of work cut out for us. And I think, all of us would be very, very happy if we are able to achieve that goal of getting to a INR 2,000 crores with a 25% to 30% margin.

[Prolin Nandu, analyst]

No, I agree with you. And Bhanu, to be very honest, we have demonstrated that execution, right? I mean, since your listing. My second question would be on margins, right? In some sense, we are already at 17%. You want to hold on to that margin of 17% by the year end as well. And clearly, you have talked about efficiencies in Adara and some of the other businesses as well, right? And we have to enter some of the seasonally strong quarters where probably transactional revenues will also be much more stronger, right?

So what are the pushes and pulls that you see in the margins going forward, right, I mean, for us to have that 17% number?

[Bhanu Chopra, executive]

Sorry, I missed the question. Can you repeat it again on the -- I think it was around margin, right?

[Prolin Nandu, analyst]

Yes, it was around margins. So I'm saying that, we are already -- in Q1, we are at around 17%, and we are saying that for the whole year also, we are guiding for a 17% kind of a number. And you have -- I mean, in your previous comment, you have mentioned that Adara is a very highly operating leverage kind of a business, right? I mean there, the margins can turn positive, right, going ahead? And then we are also entering some of the very seasonally strong quarters, right, where transaction revenue will also go up.

So I just wanted to -- I mean I see more pulls in the margin part of it. But if you can help me understand what will drag it down for the next 9 months that will be?

[Bhanu Chopra, executive]

Well, you're absolutely right. We guided for 17%, and we were -- actually had guided for about 13.5% at Q1, and we ended up coming at 17.6%, and which is, again, great execution by the team at RateGain. And my belief is that we will exceed that 17% margin, but we don't want to commit to what that delta will be from what we guided at the beginning of the year. It's something that we want to sort of wait and watch and probably come back to you guys at the end of H1, where we can give a realistic number.

But you're absolutely right. With everything that I see in the business, usually, H2 is greater than H1. There's no reason for me to believe that there's going to be anything dramatically different, given all the investments that we are doing short-term investments, which I refer to as sales and marketing, they usually begin to -- they usually only have a lag of 1, 2 quarters, after which they begin to hire as well.

We have a pretty large order book on Distribution. We are looking to monetize that beginning this quarter and next quarter, which should also see a very nice jump in our Distribution revenue. So yes, I don't see anything out there that causes any cause of concern. I believe our H2 should be better than our H1. And so as we -- as Tanmaya stated also in his opening remarks, that we do believe that we should be exceeding the guidance that we offered at the beginning of the year.

[Operator]

The next question is from the line of Rahul Jain from Dolat Capital.

[Rahul Jain, analyst]

Just -- can you confirm what is the precise inorganic number in this quarter?

[Tanmaya Das, executive]

So, Rahul, we grew 80% year-over-year, okay? Out of that, 25% is organic, rest is inorganic because we have to consolidate Adara.

[Rahul Jain, analyst]

Tanmaya, the reason I was asking this is because this is leading to difficult math for me because if I do that, it is appearing that the Adara business has grown 60% Q-o-Q, and we just had a 15-day advantage. So am I reading right or is there some wrong in my calculation?

[Tanmaya Das, executive]

Maybe, no, I think the calculations are right. Maybe I can send you data separately. The Q-o-Q improvement in Adara is around, 1 second. Sequentially, it is a growth of around, yes, 58%.

[Rahul Jain, analyst]

Okay. So is there any seasonality in this business? Or there is some spillover that has come up from the previous quarter?

[Tanmaya Das, executive]

No, there is a little bit seasonality in Adara business. Generally, this quarter is a pretty strong quarter for them. But I think, this quarter and the quarter of October, November, December are strong quarters. And the other quarters are a little bit softer, but they're not materially softer.

[Rahul Jain, analyst]

Okay. But then, if you just simply do this current revenue into 4 for Martech business, this stake case of all your requirements for the year in terms of the guidance on the top end. So are you indirectly implying the other 2 business would not grow in this year?

[Tanmaya Das, executive]

No, Rahul. I think, look, as I said, because Adara business is new for us, okay? And there is a little bit of seasonality in the business, as we talked about. We want to have a clear H1 data before we commit for any new guidance, okay? So I think we need to see some more patterns because you're currently also investing into sales and marketing, which returns are yet to come. So we need more time to commit to a new earnings guidance.

[Operator]

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Bhanu Chopra for closing comments. Thank you, and over to you, sir.

[Bhanu Chopra, executive]

Yes. Thank you, everyone. As you saw that we had a very, very strong quarter on the back of the overall tailwinds in the industry, great execution by the RateGain team. And as I mentioned now, all heads are focused on this new aspirational goal of doubling revenues. And we appreciate everybody's support. Thank you.

[Operator]

Thank you. On behalf of RateGain Travel Technologies Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.